Cyta may benefit from decision to pull out of APOEL TV rights bidding

A former executive of state-telecom Cyta said that the decision to pull out of television rights negotiations with Apoel FC was the right decision, as it may improve -at least in the short term- the profitability of the company which stood until early last year on the government’s privatisation list and is constantly losing market share on all major fronts.

“It was a right decision,” said Nicos Timotheou, Cyta’s former chief executive officer who retired a decade and a week ago. “A state-owned company cannot bid in negotiations behind closed doors”.

Cyta pull out of the negotiations on Monday, after finance minister Harris Georgiades said that he has considered even since he was a lawmaker “football television rights as a bubble” because prices have exceeded what can be justified as reasonable.

The telecom’s Cytavision department, which is in charge of televising football games, reportedly offered Apoel up to €3m a year for the television rights of its home matches compared to €3.2m offered by competitor Cablenet and the current contract of €1.9m annually which expires in 2019.

While Cyta was subsidising the Cytavision department losses with profits from elsewhere, the parent company’s market share in broad band connections has been constantly on decline in recent years and stood at 59 per cent in the last quarter of 2016 compared to 74.9 per cent in the first quarter of 2011, according to a statement on the website of the telecom and post services regulator. This is the result of new subscribers opting for private competitors such as MTN, Primetel and Cablenet whose market share in new subscribers last year was 32 per cent, 32 per cent and 27 per cent respectively, leaving Cyta a mere 8 per cent.

Cyta’s effort to maintain its market share by attracting football fans to Cytavision over the past few years came at a considerable cost to the company, with Cytavision’s accumulated deficit over 2011 to 2016 reaching €14.6m, according to data compiled by the office of the Auditor-general. The amount refers to total revenue minus direct expenses for the acquisition of content and excludes other cost factors such as staffing. In 2016 alone, Cytavision recorded a deficit of €1.8m against a loss of €425,698 the year before mainly on a revenue slump resulting from a reduction in subscriber numbers and discount offers.

In the 2015/2016 season alone, Cytavision spent €10.6m for football television rights and grants to Cypriot football clubs, according to the auditor-general’s latest report. More than half of expenditure on content goes to football television rights while 24 per cent of advertising is in the form of sport sponsorships.

Cyta posted a profit of €75.2m last year compared to net earnings of €58.8m the year before and employed last year permanent 1,642 workers with an average annual cost of €51,127, plus 602 casual workers at an average cost of €16,120.

In his report, the auditor-general recommended that Cyta should in the future decide its football television rights offers based on a value-for-money evaluation.